Coronavirus Threatens Global Financial Markets – On Friday the 28th, Federal Reserve Chair Jerome Powell issued a statement in which he said that while the U.S. economy remained strong, Coronavirus ‘posed an evolving risk’ and the Fed stood ready to take action if needed.
U.S. stocks pared losses slightly after Powell’s comments, but the S&P 500 index SPX still closed lower for a seventh straight day. Still, whatever the scope for fiscal policy, investors seemed to think events are forcing monetary authorities toward some sort of response even if their firepower is limited.
The Bank of Canada may show itself to be the first out of the gate with a response as it convenes a policy meeting next week. Economists polled by Reuters see no change in rates from the BOC, but money markets are now pricing a quarter point cut.
There was a similar show of unity among policymakers globally, with officials in Canada, Europe, Japan, Switzerland and elsewhere saying they stood ready to act if the Coronavirus remains uncontained.
“We anticipate that the Fed will cut rates by at least 50 basis points over the coming months, with our new baseline forecast expecting 25 basis point cuts at the next two meetings in March and April,” Deutsche Bank economists said in a note on Friday.
European policymakers have said they also believe it is too early to say whether a central bank response is appropriate.
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